REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE

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1 An umbrella type open-ended investment company with variable capital and segregated liability between Sub-Funds ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Registration No

2 TABLE OF CONTENTS COMPANY INFORMATION 3 GENERAL INFORMATION 6 DIRECTORS REPORT 11 DEPOSITARY S REPORT 18 INDEPENDENT AUDITOR S REPORT 19 INVESTMENT MANAGER S REPORT 24 STATEMENT OF FINANCIAL POSITION 31 STATEMENT OF COMPREHENSIVE INCOME 39 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE PARTICIPATING SHARES 47 STATEMENT OF CASH FLOWS 55 NOTES TO THE FINANCIAL STATEMENTS 63 SCHEDULES OF INVESTMENTS 124 SIGNIFICANT PORTFOLIO TRANSACTIONS* 210 SCHEDULE OF COLLATERAL* 224 APPENDIX 1 REMUNERATION POLICY* 229 APPENDIX 2- SECURITIES FINANCING TRANSACTIONS REGULATIONS* 232 * The Significant Portfolio Transactions, Schedule of Collateral, Remuneration Policy and Securities Financing Transactions Regulations are unaudited. Page 2

3 COMPANY INFORMATION DIRECTORS Ian Ashment* Alan White* Colm Torpey* Clemens Reuter* Robert Burke** Frank Muesel* (appointed 14 July 2016) *Non-executive Directors **Independent non-executive Director REGISTERED OFFICE 78 Sir John Rogerson s Quay Dublin 2 Ireland PROMOTER Effective from 16 July 2016 UBS Limited 5 Broadgate London EC2M 2QS United Kingdom Formerly UBS Limited 3 Finsbury Avenue London EC2M 2PA United Kingdom MANAGER INVESTMENT MANAGER ADMINISTRATOR AND SECRETARY DEPOSITARY INDEPENDENT AUDITORS LEGAL ADVISERS IN IRELAND Lantern Structured Asset Management Limited College Park House South Frederick Street Dublin 2 UBS Asset Management (UK) Limited 5 Broadgate London EC2M 2QS United Kingdom State Street Fund Services (Ireland) Limited 78 Sir John Rogerson s Quay Dublin 2 Ireland State Street Custodial Services (Ireland) Limited 78 Sir John Rogerson s Quay Dublin 2 Ireland PricewaterhouseCoopers Chartered Accountants and Statutory Audit Firm One Spencer Dock North Wall Quay Dublin 1 Ireland Maples and Calder 75 St Stephen s Green Dublin 2 Ireland 3

4 COMPANY INFORMATION (continued) INFORMATION AND PAYING AGENT IN AUSTRIA UK FACILITES AGENT FRENCH CENTRALISING AND CORRESPONDENT AGENT GERMANY PAYING AND INFORMATION AGENT SWISS REPRESENTATIVE SWISS PAYING AGENT DISTRIBUTOR AND AUTHORISED PARTICIPANT LUXEMBOURG PAYING AGENT LIECHTENSTEIN REPRESENTATIVE SWEDISH PAYING AGENT Erste Bank der oesterreichischen Sparkassen AG Am Belvedere 1 A-1100 Vienna Austria UBS Asset Management (UK) Limited 5 Broadgate London EC2M 2QS United Kingdom Société Générale 29 Boulevard Haussmann Paris France UBS Europe SE Bockenheimer Landstrasse Frankfurt Germany UBS Fund Management (Switzerland) AG Aeschenplatz Basel Switzerland UBS Switzerland AG Bahnhofstrasse 45 CH-8098 Zurich Switzerland UBS AG Aeschenvorstadt Basel; and Bahnhofstrasse Zurich Switzerland State Street Bank Luxembourg S.A. 49, Avenue J.F. Kennedy L-1855 Luxembourg Liechtensteinische Landesbank AG Staedtle Vaduz Liechtenstein Skandinaviska Enskilda Banken AB (Publ) Sergels Torg 2 SE Stockholm Sweden 4

5 COMPANY INFORMATION (continued) Shareholders may obtain the Prospectus, the Key Investor Information Document (KIID), the latest annual and semi-annual reports, the changes in the composition of the securities portfolio during the reporting year and copies of the Memorandum and Articles of Association free of charge from the registered office of the Manager, the Administrator, or the local representatives in the countries where the Company is registered and in Switzerland at UBS Switzerland AG, Bahnhofstrasse 45, 8098 Zurich, Switzerland. For investors in Germany, pursuant to Sec. 297 (1) of the German Capital Investment Code, the Prospectus, the Key Investor Information Document, the articles, the annual and semi-annual reports, as well as the issue and redemption prices are available free of charge from the office of the German Information and Paying Agent as specified above. 5

6 GENERAL INFORMATION The following information is derived from the Company s Prospectus. The Prospectus, the Articles of Association, the Key Investor Information Document (KIID), the Annual and Semi-Annual Report, as well as a list containing all purchases and sales which have been made during the reporting period, can be obtained free of charge from the office of the Administrator. Structure UBS ETFs plc ( the Company ) is an umbrella investment company with segregated liability between Sub-Funds and with variable capital incorporated on 21 May 2010 and is authorised in Ireland as an undertaking for collective investment in transferable securities pursuant to the European Communities (Undertaking for Collective Investment in Transferable Securities) Regulations, 2011 (as amended), and under the Central Bank (Supervision And Enforcement) Act 2013 (Section 48(1)) (the "UCITS Regulations"), Regulations 2015 (as amended) (the "Central Bank UCITS Regulations"). The Company is structured as an umbrella investment company, in that different Sub-Funds may be established from time to time by the Directors with the prior approval of the Central Bank of Ireland (the Central Bank ). A separate portfolio of assets shall be maintained for each Sub-Fund and shall be invested in accordance with the investment objective applicable to such Sub-Fund. At the financial year end date, the following Sub-Funds (the Sub-Funds ) are in operation: Sub-Fund Launch Date Currency FTSE July 2010 GBP HFRX Global Hedge Fund Index 9 September 2010 CMCI Composite 3 November 2010 Bloomberg Commodity Index 3 November 2010 S&P December 2010 MSCI USA 15 December 2010 MSCI EMU 23 March 2011 EUR MSCI Japan 23 March 2011 JPY MSCI Canada 23 March 2011 CAD MSCI Emerging Markets 27 April 2011 MSCI AC Asia Ex Japan 20 August 2012 MAP Balanced 7 20 June 2013 MSCI ACWI 11 August 2015 CMCI Ex-Agriculture 24 March 2016 Bloomberg Commodity CMCI 25 May 2017 Distribution Policy None of the Sub-Funds intend to pay dividends with the exception of MSCI ACWI, which has paid dividends as disclosed in Note 9. However, the Directors may, in their absolute discretion, determine to declare dividends in respect of any Share Class and Shareholders will be notified accordingly. Investment Objectives FTSE 100 The investment objective of the FTSE 100 is to deliver the net total return of the Reference Index (being the FTSE 100 Net Total Return Index) HFRX Global Hedge Fund Index The investment objective of the HFRX Global Hedge Fund Index is to deliver the net total return of the Reference Index (being the HFRX Global Hedge Fund Index). 6

7 GENERAL INFORMATION (continued) Investment Objectives (continued) CMCI Composite The investment objective of the CMCI Composite is to deliver the return of the Reference Index (being UBS Bloomberg Constant Maturity Commodity Index Total Return). Bloomberg Commodity Index The investment objective of the Bloomberg Commodity Index is to deliver the excess return of the Reference Index (being Bloomberg Commodity Index Excess Return). S&P 500 The investment objective of the S&P 500 is to deliver the net total return of the Reference Index (being S&P 500 Net Total Return Index). MSCI USA The investment objective of the MSCI USA is to deliver the net total return of the Reference Index (being MSCI USA Index Net Total Return Index). MSCI EMU The investment objective of the MSCI EMU is to deliver the net total return of the Reference Index (being MSCI EMU (European Economic and Monetary Union) TRN Index). MSCI Japan The investment objective of the MSCI Japan is to deliver the net total return of the Reference Index (being MSCI Japan Index Net Total Return). MSCI Canada The investment objective of the MSCI Canada is to deliver the net total return of the Reference Index (being MSCI Canada Index Net Total Return). MSCI Emerging Markets The investment objective of the MSCI Emerging Markets is to deliver the net total return of the Reference Index (being MSCI Emerging Markets Total Return Net Index). MSCI AC Asia Ex Japan The investment objective of the MSCI AC Asia Ex Japan is to deliver the net total return of the Reference Index (being MSCI AC Asia Ex Japan Net Total Return Index). MAP Balanced 7 The investment objective of the MAP Balanced 7 is to deliver the return of the Reference Strategy (being the Multi Asset Portfolio MAP Strategy). The Reference Strategy is a rules based strategy which provides exposure to three main asset classes, namely equities, commodities and bonds and also a potential short term interest rate exposure. 7

8 GENERAL INFORMATION (continued) Investment Objectives (continued) MSCI ACWI The investment objective of the MSCI ACWI is to deliver the net total return of the Reference Index (being MSCI ACWI Net Total Return Index). CMCI Ex-Agriculture The investment objective of the CMCI Ex-Agriculture is to deliver the return of the Reference Index (being UBS Bloomberg CMCI Ex-Agriculture Ex-Livestock Capped Index Total Return). Bloomberg Commodity CMCI The investment objective of the Bloomberg Commodity CMCI is to deliver the return of the Reference Index (being UBS Bloomberg BCOM Constant Maturity Commodity Index Total Return). Registration Certain Share Classes of the following Sub-Funds of the Company are registered for public distribution in the following countries at 30 June 2017: Fund Ireland Switzerland Germany Netherlands France FTSE 100 Yes Yes Yes Yes Yes HFRX Global Hedge Fund Index Yes Yes Yes Yes Yes CMCI Composite Yes Yes Yes Yes Yes Bloomberg Commodity Index Yes Yes Yes - - S&P 500 Yes Yes Yes Yes Yes MSCI USA Yes Yes Yes Yes Yes MSCI EMU Yes Yes Yes Yes Yes MSCI Japan Yes Yes Yes Yes Yes MSCI Canada Yes Yes Yes Yes Yes MSCI Emerging Markets Yes Yes Yes Yes Yes MSCI AC Asia Ex Japan Yes Yes Yes - - MAP Balanced 7 Yes Yes Yes - Yes MSCI ACWI Yes Yes Yes - Yes CMCI Ex-Agriculture Yes Yes Yes - - Bloomberg Commodity CMCI * Yes Yes Yes - - Fund United Kingdom Italy Luxembourg Austria FTSE 100 Yes Yes Yes Yes HFRX Global Hedge Fund Index Yes Yes Yes Yes CMCI Composite Yes Yes Yes Yes Bloomberg Commodity Index Yes Yes - - S&P 500 Yes Yes Yes Yes MSCI USA Yes Yes Yes Yes MSCI EMU Yes Yes Yes Yes MSCI Japan Yes Yes Yes Yes MSCI Canada Yes Yes Yes Yes MSCI Emerging Markets Yes Yes Yes Yes MSCI AC Asia Ex Japan Yes Yes - - MAP Balanced 7 Yes Yes - - MSCI ACWI Yes Yes - Yes CMCI Ex-Agriculture Yes Yes - Yes Bloomberg Commodity CMCI * Yes Yes - - 8

9 GENERAL INFORMATION (continued) Registration (continued) Fund Liechtenstein Sweden Singapore Japan FTSE 100 Yes Yes - - HFRX Global Hedge Fund Index Yes Yes - - CMCI Composite Yes Yes - - Bloomberg Commodity Index Yes Yes - - S&P 500 Yes Yes - - MSCI USA Yes Yes - - MSCI EMU Yes Yes - - MSCI Japan Yes Yes - - MSCI Canada Yes Yes - - MSCI Emerging Markets Yes Yes - - MSCI AC Asia Ex Japan Yes Yes Yes** - MAP Balanced 7 Yes MSCI ACWI Yes - Yes** Yes CMCI Ex-Agriculture Yes Bloomberg Commodity CMCI * Yes * Bloomberg Commodity CMCI launched on 25 May ** The Sub-Fund is a restricted foreign scheme pursuant to the Sixth Schedule of the Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations 2005 in Singapore. The Sub-Fund is not authorised or recognised by the Monetary Authority of Singapore and the Sub-Fund s shares are not allowed to be offered to the retail public. Listings The Sub-Funds of the Company are listed on the following stock exchanges at 30 June 2017: Fund SIX (Switzerland) XETRA (Germany) LSE* (UK) Borsa Italiana (Italy) FTSE 100 Yes HFRX Global Hedge Fund Index Yes Yes - - CMCI Composite Yes Yes Yes Yes Bloomberg Commodity Index Yes S&P 500 Yes MSCI USA Yes MSCI EMU Yes MSCI Japan Yes MSCI Canada Yes Yes Yes Yes MSCI Emerging Markets Yes - - Yes MSCI AC Asia Ex Japan Yes Yes - Yes MAP Balanced 7 Yes - - Yes MSCI ACWI Yes - - Yes CMCI Ex-Agriculture Yes Bloomberg Commodity CMCI ** Yes * Sub-Funds admitted to trading on the ETF segment of the London Stock Exchange. ** Bloomberg Commodity CMCI launched on 25 May

10 GENERAL INFORMATION (continued) Common Investment Pools To reduce operational and administrative charges and to facilitate diversification of investments the Manager may authorise the assets of any Sub-Fund to be managed in conjunction with other funds established by the Manager or other funds promoted or managed by the Manager or any company affiliated to the Manager. This will be done by establishing a pool of assets ( Pool ) comprising cash and investments contributed by all funds which participate in the Pool ( Participating Funds ). This technique is known as pooling. A Pool is not a separate legal entity and an investor may not invest directly in a Pool. The Investment Manager shall not be permitted to manage the assets of any Fund on a pooled basis without the prior consent of the Manager. The Manager shall be notified in respect of the admission of any fund as a Participating Fund in a Pool in which a Fund participates. As at 30 June 2017, the following Sub-Funds use pooling: FTSE 100 CMCI Composite Bloomberg Commodity Index S&P 500 MSCI USA MSCI EMU MSCI Japan MSCI Canada MSCI Emerging Markets MSCI AC Asia Ex Japan MAP Balanced 7 MSCI ACWI CMCI Ex-Agriculture Bloomberg Commodity CMCI Each Sub-Fund s investment in the Pool is shown in the Statement of Financial Position and the Schedule of Investment of that Sub-Fund as the Sub-Fund s share of the investments held by the Pool. 10

11 DIRECTORS REPORT The Directors present their report together with the audited financial statements of UBS ETFs plc (the Company ) for the financial year ended 30 June At 30 June 2017, the Company comprised of fifteen Sub-Funds (the Sub-Funds ): FTSE 100 HFRX Global Hedge Fund Index CMCI Composite Bloomberg Commodity Index S&P 500 MSCI USA MSCI EMU MSCI Japan MSCI Canada MSCI Emerging Markets MSCI AC Asia Ex Japan MAP Balanced 7 MSCI ACWI CMCI Ex-Agriculture Bloomberg Commodity CMCI Results for the financial year and state of affairs The results for the financial year are set out in the Statement of Comprehensive Income and the state of affairs of the Sub- Funds and the Company is set out in the Statement of Financial Position. Directors The following Directors held office on 30 June 2017 and throughout the financial year then ended except where otherwise noted: Ian Ashment* Alan White* Colm Torpey* Clemens Reuter* Robert Burke** Frank Muesel* (appointed 14 July 2016) * Non-executive Directors ** Independent non-executive Director The Company has delegated the day-to-day management and running of the Company to the Manager in accordance with the policies approved by the Directors. Consequently, all Directors of the Company are non-executive. Directors and Secretary s interests None of the Directors, their families or the Secretary held any interest in the shares of the Company during the financial year with the exception of Alan White and Colm Torpey who each held one 1 subscriber share in the Company. Please see Note 4 Related Party Transactions for further information. Director Ian Ashment is also an employee of the Investment Manager. Directors Frank Muesel and Clemens Reuter are also employees of UBS AG. 11

12 DIRECTORS REPORT (continued) Directors and Secretary s interests (continued) Directors Alan White and Colm Torpey are also employees of the Manager. Accordingly, Ian Ashment has an interest in the Investment Management Agreement, with Frank Muesel and Clemens Reuter also having an interest in the Distribution Agreement. Alan White and Colm Torpey have an interest in the Management Agreement. No Director had at any time during the financial year or at the financial year end an interest in any other contract of significance in relation to the business of the Company. Adequate accounting records The Directors ensure compliance with the Company s obligation under Section 281 of the Companies Act, 2014 to keep adequate accounting records by appointing competent persons to be responsible for them. The accounting records are kept by State Street Fund Services (Ireland) Limited, at 78 Sir John Rogerson s Quay, Dublin 2, Ireland. Dividends In relation to the accumulating (Acc) share classes, it is not the intention of the Directors to declare dividends in respect of any of the Sub-Funds. However, the Directors may, in their absolute discretion, determine to declare dividends in respect of any Share Class and Shareholders will be notified accordingly. Any dividends payable will be effected in accordance with the Dividend Policy stated in the Prospectus. During the financial year, a dividend was declared for the following share classes: Sub-Fund Share Class Ex-Date Dividend Rate MSCI ACWI (hedged to ) A-UKdis 31 January per share MSCI ACWI (hedged to EUR) A-UKdis 31 January 2017 EUR per share MSCI ACWI (hedged to GBP) A-UKdis 31 January 2017 GBP per share MSCI ACWI (hedged to CHF) A-UKdis 31 January 2017 CHF per share MSCI ACWI (hedged to ) A-UKdis 29 July per share MSCI ACWI (hedged to EUR) A-UKdis 29 July 2016 EUR per share MSCI ACWI (hedged to GBP) A-UKdis 29 July 2016 GBP per share MSCI ACWI (hedged to CHF) A-UKdis 29 July 2016 CHF per share Subsequent to the financial year end, a dividend was declared for the following share classes: Sub-Fund Share Class Ex-Date Dividend Rate MSCI ACWI (hedged to ) A-UKdis 31 July per share MSCI ACWI (hedged to EUR) A-UKdis 31 July 2017 EUR per share MSCI ACWI (hedged to GBP) A-UKdis 31 July 2017 GBP per share MSCI ACWI (hedged to CHF) A-UKdis 31 July 2017 CHF per share Review of Business There was no change in the nature of the Company s business during the financial year. A detailed review of business is included in the Investment Manager s Report for each Sub-Fund. Risk management objectives and policies Details of the Company s risk management objectives and policies are included in Note 6 of the Financial Statements. Significant events during the financial year Please see Note 15 for significant events during the financial year end. 12

13 DIRECTORS REPORT (continued) Significant events after the financial year end Please see Note 16 for significant events after the financial year end. Independent auditor PricewaterhouseCoopers, Chartered Accountants and Statutory Audit Firm have expressed their willingness to continue in office in accordance with Section 383(2) of the Companies Act, Corporate Governance Statement General Principles The Company is subject to the requirements of the Companies Act, 2014 (the "Companies Act, 2014"), the Central Bank of Ireland s UCITS Regulations, as applicable to the Company. The European Communities (Directive 2006/46/EC) Regulations (S.I. 450 of 2009 and S.I. 83 of 2010) (the Regulations ) requires the inclusion of a corporate governance statement in the Directors Report. Although there is no specific statutory corporate governance code applicable to Irish collective investment schemes whose shares are admitted to trading on an exchange, the Company is subject to corporate governance practices imposed by: (i) The Companies Act, 2014 which are available for inspection at the registered office of the Company; and may also be obtained at (ii) The Articles of Association of the Company which are available for inspection at the registered office of the Company and at the Companies Registration Office in Ireland; and (iii) The Central Bank of Ireland s UCITS Regulations, which can be obtained from the Central Bank s website at:- and are available for inspection at the registered office of the Company. (iv) The Company voluntarily adopted and was fully compliant with the Corporate Governance Code for Irish Domiciled Collective Investment Schemes as published by the Irish Funds ( IF ) with effect from 1 January The Board of Directors did not adopt any further corporate governance codes for the financial year ended 30 June Internal Control and Risk Management Systems in Relation to Financial Reporting The Board is responsible for establishing and maintaining adequate internal control and risk management systems of the Company in relation to the financial reporting process. Such systems are designed to manage rather than eliminate the risk of error or fraud in achieving the Company s financial reporting objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board has procedures in place to ensure that all adequate accounting records are properly maintained and are readily available, including production of annual and half yearly financial statements. The Board has appointed State Street Fund Services (Ireland) Limited (the Administrator ) to maintain the adequate accounting records of the Company. The Administrator is authorised and regulated by the Central Bank and must comply with the rules imposed by the Central Bank. From time to time, the Board of Directors examines and evaluates the Administrator s financial accounting and reporting routines. The annual financial statements of the Company are produced by the Administrator and reviewed by the Manager. 13

14 DIRECTORS REPORT (continued) Corporate Governance Statement (continued) Internal Control and Risk Management Systems in Relation to Financial Reporting (continued) They are required to be approved by the Board and the annual and half yearly financial statements of the Company are required to be filed with the Central Bank. During the financial year of these financial statements, the Board was responsible for the review and approval of the unaudited half yearly financial statements and annual financial statements as set out in the Statement of Directors Responsibilities. The statutory financial statements are required to be audited by independent auditors who report annually to the Board on their findings. The Board monitors and evaluates the independent auditor s performance, qualifications and independence. As part of its review procedures, the Board receives presentations from relevant parties including consideration of International Financial Reporting Standards ("IFRS") accounting standards and their impact on the annual financial statements, and presentations and reports on the audit process. The Board evaluates and discusses significant accounting and reporting issues as the need arises. Dealings with Shareholders The convening and conduct of shareholders meetings are governed by the Articles of Association of the Company and the Companies Act, Although the Directors may convene an extraordinary general meeting of the Company at any time, the Directors were required to convene the first annual general meeting of the Company within eighteen months of incorporation and fifteen months of the date of the previous annual general meeting thereafter, provided that an annual general meeting is held within each calendar year. At least twenty-one clear days notice of every annual general meeting and any meeting convened for the passing of a special resolution must be given to shareholders and fourteen days notice must be given in the case of any other general meeting, unless the auditors of the Company and all the shareholders of the Company entitled to attend and vote agree to shorter notice. Two shareholders present either in person or by proxy constitutes a quorum at a general meeting. The share capital of the Company is divided into different classes of shares and the Irish Companies Act, 2014 and the Articles of Association provide that the quorum for a general meeting convened to consider any alteration to the rights attached to any class of shares, is two or more shareholders present in person or by proxy, holding or representing by proxy at least one third of the issued shares of the relevant class. Every holder of participating shares or non-participating (subscriber) shares present, in person or by proxy who votes on a show of hands is entitled to one vote. On a poll, every holder of participating shares present, in person or by proxy, is entitled to one vote in respect of each share held by him, and every holder of non-participating (subscriber) shares is entitled to one vote in respect of all non-participating shares held by him. At any general meeting of the Company, a resolution put to the vote of the meeting is decided on a show of hands unless, before or upon the declaration of the result of the show of hands, a poll is demanded by the chairman of the general meeting, or by at least two members or shareholders present, in person or by proxy, having the right to vote at such meeting, or any holder or holders of participating shares present, in person or by proxy, representing at least one tenth of the shares in issue having the right to vote at such meeting. Shareholders may resolve to sanction an ordinary resolution or special resolution at a shareholders meeting. Alternatively, a resolution in writing signed by all of the shareholders and holders of non-participating (subscriber) shares for the time being entitled to attend and vote on such resolution at a general meeting of the Company, will be valid and effective for all purposes as if the resolution had been passed at a general meeting of the Company duly convened and held. An ordinary resolution of the Company (or of the shareholders of a particular fund or class of shares) requires a simple majority of the votes cast by the shareholders voting, in person or by proxy, at the meeting at which the resolution is proposed. A special resolution of the Company (or of the shareholders of a particular fund or class of shares) requires a majority of not less than 75 shareholders present, in person or by proxy, and voting in general meeting in order to pass a special resolution including a resolution to amend the Articles of Association. Board composition and activities In accordance with the Companies Act, 2014 and the Articles of Association, unless otherwise determined by an ordinary resolution of the Company in general meeting, the number of Directors may not be less than two nor more than twelve. Currently the Board is comprised of five non-executive Directors and one independent non-executive Director. Details of the current Directors are set out above, under the heading Directors. 14

15 DIRECTORS REPORT (continued) Corporate Governance Statement (continued) Board composition and activities (continued) The business of the Company is managed by the Directors, who exercise all such powers of the Company as are not by the Companies Act, 2014 or by the Articles of Association of the Company required to be exercised by the Company in general meeting. The Board is responsible for the Company s overall direction and strategy and to this end it reserves the decision making power on issues such as the determination of medium and long term goals, review of managerial performance, organisational structure and capital needs and commitments to achieve the Company s strategic goals. To achieve these responsibilities, the Board meets four times a year to review the operations of the Company, address matters of strategic importance and to receive reports from the Administrator, Depositary and the Investment Manager. However, a Director may, and the Company Secretary on the requisition of a Director will, at any time summon a meeting of the Directors and ad hoc meetings in addition to the four meetings are convened as required. In the case of an equality of votes, the Chairman of the meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a second or casting vote. The quorum necessary for the transaction of business at a meeting of the Directors is two. A sub-committee of the Board operated during the financial year with authority to bind the Board with respect to certain operational issues such as activating share classes and waiving of dealing deadlines. All decisions of the sub-committee are reported to the Board on a regular basis. Connected Persons Regulation 41 of the UCITS Regulations Restrictions of transactions with connected persons states that A responsible person shall ensure that any transaction between a UCITS and a connected person is conducted a) at arm s length; and b) in the best interest of the unit-holders of the UCITS. As required under UCITS Regulation 78.4, the Directors are satisfied that there are arrangements in place, evidenced by written procedures, to ensure that the obligations that are prescribed by Regulation 41(1) are applied to all transactions with a connected person; and all transactions with a connected persons that were entered into during the period to which the report relates complied with the obligations that are prescribed by Regulation 41(1). Audit Committee The Directors believe that there is no requirement to form an audit committee as the Board is formed of non -executive Directors with one independent Director and the Company complies with the provisions of the Irish Funds Corporate Governance Code. The Directors have delegated the day to day investment management and administration of the Company to the Investment Manager and the Administrator respectively. Directors' Fees The charge for Directors remuneration during the financial year ended 30 June 2017 amounted to 25,000 (2016: 25,000), of which 12,500 (2016: 12,500) was payable at the financial year end. Direct brokerage There was no direct brokerage services utilised for the financial year ended 30 June 2017 (2016: Nil). 15

16 DIRECTORS REPORT (continued) Directors Responsibility Statement The Directors are responsible for preparing the Directors Report and financial statements in accordance with Irish law and International Financial Reporting Standards as adopted by the European Union ("IFRS"). Irish company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that financial year. Under that law the Directors have elected to prepare the financial statements in accordance with IFRS and applicable Irish law. Under Irish law the Directors shall not approve the financial statement unless they are satisfied that they give a true and fair view of Company's assets, liabilities and financial position as at the end of the financial year and of the profit or loss of the Company for the financial year. In preparing these financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether the financial statements have been prepared in accordance with applicable accounting standards and identify the standards in question, subject to any material departures from those standards being disclosed and explained in the notes to the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to: correctly record and explain the transactions of the Company; enable, at any time, the assets, liabilities, financial position and profit or loss of the Company to be determined with reasonable accuracy; and enable the Directors to ensure that the financial statements comply with the Companies Act, 2014 and enable those financial statements to be audited. The Company s financial statements will be published electronically on a web site maintained by the Investment Manager, namely The Directors are responsible for ensuring that the financial statements provided to the Investment Manager for publication on the website are consistent with the manually signed financial statements. Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors are responsible for safeguarding the assets of the Company. In this regard they have entrusted the assets of the Company to State Street Custodial Services (Ireland) Limited (the Depositary ) who has been appointed as Depositary and Trustee to the Company pursuant to the terms of a depositary agreement. The Directors are also responsible for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors comply with the Company s obligation to keep adequate accounting records by the delegation of the accounting function to the Administrator. The measures taken by the Directors to secure compliance with the Company's obligations to keep adequate accounting records are the use of appropriate systems and procedures and employment of competent persons. The accounting records are kept and maintained by State Street Fund Services (Ireland) Limited (the Administrator ) at 78 Sir John Rogerson's Quay, Dublin 2, Ireland. Directors compliance statement The Board is responsible for securing the Company's compliance with its relevant obligations as set out in section 225 of the Companies Act, 2014 (the "Obligations"), which includes compliance with tax law and certain company law obligations. The Board confirms: a compliance policy statement has been drawn up setting out the Company s policies (that, in the Board s opinion are appropriate to the Company) with respect to the compliance by the Company with its relevant obligations; appropriate arrangements or structures have been put in place that are, in the Board s opinion, designed to secure material compliance with the Company s relevant obligations; and a review has been conducted during the financial year to which this report refers of the arrangements or structures that have been put in place. 16

17 DIRECTORS REPORT (continued) Directors Responsibility Statement (continued) Directors compliance statement (continued) The Directors are also responsible for preparing a Directors Report that complies with the requirements of the Companies Act, The Directors confirm to the best of their knowledge, belief and understanding, having made the appropriate enquiries, that they have complied with the above requirements in preparing the financial statements. Statement of relevant audit information As at the date this Directors' Report was approved and signed (set out below), each Director is satisfied that: there is no relevant audit information of which the Company s statutory auditors are unaware; and s/he has taken all the steps that he or she ought to have taken as a director in order to make herself or himself aware of any relevant audit information and to establish that the Company s statutory auditors are aware of that information; and where relevant audit information means information needed by the Company s statutory auditors in connection with preparing their report. For and on behalf of the Board ALAN WHITE Alan White Director COLM TORPEY Colm Torpey Director 10 October

18 DEPOSITARY S REPORT To the Shareholders of UBS ETFs plc (the Company ) We have enquired into the conduct of the Company for the financial year ended 30 June 2017, in our capacity as Depositary to the Company. This report including the opinion has been prepared for and solely for the shareholders in the Company as a body, in accordance with Regulation 34, (1), (3) and (4) in Part 5 of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011, as amended, ( the UCITS Regulations ), and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown. Responsibilities of the Depositary Our duties and responsibilities are outlined in Regulation 34, (1), (3) and (4) in Part 5 of the UCITS Regulations. One of those duties is to enquire into the conduct of the Company in each annual accounting period and report thereon to the shareholders. Our report shall state whether, in our opinion, the Company has been managed in that financial year in accordance with the provisions of the Company s Constitution (the "Constitution") and the UCITS Regulations. It is the overall responsibility of the Company to comply with these provisions. If the Company has not so complied, we as Depositary must state why this is the case and outline the steps which we have taken to rectify the situation. Basis of Depositary Opinion The Depositary conducts such reviews as it, in its reasonable opinion, considers necessary in order to comply with its duties as outlined in Regulation 34, (1), (3) and (4) in Part 5 of the UCITS Regulations and to ensure that, in all material respects, the Company has been managed (i) in accordance with the limitations imposed on its investment and borrowing powers by the provisions of the Constitution and the UCITS Regulations and (ii) otherwise in accordance with the Constitution and the appropriate regulations. Opinion In our opinion, the Company has been managed during the financial year, in all material respects: (i) in accordance with the limitations imposed on the investment and borrowing powers of the Company by the Constitution, the UCITS Regulations and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015, as amended, ( the Central Bank UCITS Regulations ); and (ii) otherwise in accordance with the provisions of the Constitution, the UCITS Regulations and the Central Bank UCITS Regulations. State Street Custodial Services (Ireland) Limited 78 Sir John Rogerson s Quay Dublin 2 Ireland 10 October

19 Independent auditors report to the members of UBS ETFs plc Report on the audit of the financial statements Opinion In our opinion, UBS ETFs plc s financial statements: give a true and fair view of the company s and sub-funds (as listed on page 6) assets, liabilities and financial position as at 30 June 2017 and of their results and cash flows for the year then ended; have been properly prepared in accordance with International Financial Reporting Standards ( IFRSs ) as adopted by the European Union; and have been properly prepared in accordance with the requirements of the Companies Act 2014 and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (as amended). We have audited the financial statements, included within the Annual Report, which comprise: the statement of financial position as at 30 June 2017; the statement of comprehensive income for the year then ended; the statement of changes in net assets attributable to holders of redeemable participating shares for the year then ended; the statement of cash flows for the year then ended; the schedules of investments for each of the sub-funds as at 30 June 2017; and the notes to the financial statements for the company and each of the sub-funds, which include a description of the significant accounting policies. Our opinion is consistent with our reporting to the Board. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (Ireland) ( ISAs (Ireland) ) and applicable law. Our responsibilities under ISAs (Ireland) are further described in the Auditors responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Ireland, which includes IAASA s Ethical Standard as applicable to listed public interest entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, we declare that non-audit services prohibited by IAASA s Ethical Standard were not provided to the company. Other than those disclosed in note 3, we have provided no non-audit services to the company in the period from 1 July 2016 to 30 June

20 Independent auditors report to the members of UBS ETFs plc (continued) Report on the audit of the financial statements (continued) Our audit approach Overview Materiality Audit scope Key audit matters Overall materiality: 50 basis points of Net Assets Value ("NAV") at 30 June 2017 for each of the company s sub-funds. The company is an open-ended investment company with variable capital and engages Lantern Structured Asset Management Limited (the Manager ) to manage certain duties and responsibilities with regards to the day-to-day management of the company. We tailored the scope of our audit taking into account the types of investments within the company, the involvement of the third parties referred to overleaf, the accounting processes and controls, and the industry in which the company operates. We look at each sub-fund at an individual level. Existence of financial assets at fair value through profit or loss. Valuation of financial assets at fair value through profit or loss. The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example the selection of pricing sources to value the investment portfolio. As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud. Key audit matters Key audit matters are those matters that, in the auditors professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. Key audit matter Existence of financial assets at fair value through profit or loss See accounting policy 1 (c) (iv) on page 65 and note 2 of the financial statements of the Company for further details. The financial assets at fair value through profit or loss included in the statement of financial position of each subfund are held in the sub-fund s name at 30 June We focused on this area because it represents the principal element of the financial statements. Valuation of financial assets at fair value through profit or loss See accounting policy 1 (c) (iv) on page 65, note 2 and note 6(c) of the financial statements of the Company for further details. The financial assets at fair value through profit or loss included in the statement of financial position of each subfund at 30 June 2017 are valued at fair value in line with IFRSs as adopted by the European Union. We focused on this area because it represents the principal element of the financial statements. How our audit addressed the key audit matter We obtained independent confirmation from the Depositary and counterparties of the investment portfolio held at 30 June 2017, agreeing the amounts held to the accounting records. We tested the valuation of the transferable securities by independently agreeing the valuation of the transferable securities to third party vendor sources. We tested the valuation of swaps at fair value by using our own in-house experts to revalue the swaps based on available market data and the terms of the underlying swaps. We determined that the valuation of the swaps were within the range of our pre-defined thresholds. 20

21 Independent auditors report to the members of UBS ETFs plc (continued) Report on the audit of the financial statements (continued) How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the industry in which it operates. As at 30 June 2017 there are 15 sub-funds operating. The company s Statement of Financial Position, Statement of Comprehensive Income, Statement of Cash Flows and Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares are an aggregation of the positions and results of the 15 sub-funds. The directors control the affairs of the company and are responsible for the overall investment policy which is determined by them. The company engages the Manager to manage certain duties and responsibilities with regards to the day to day management of the company. The Manager has delegated certain responsibilities to UBS Asset Management (UK) Limited (the Investment Manager ) and to State Street Fund Services (Ireland) Limited (the Administrator ). The financial statements, which remain the responsibility of the directors, are prepared on their behalf by the Administrator. The company has appointed State Street Custodial Services (Ireland) Limited (the Depositary ) to act as Depositary of the company s assets. In establishing the overall approach to our audit we assessed the risk of material misstatement at a sub-fund level, taking into account the nature, likelihood and potential magnitude of any misstatement. As part of our risk assessment, we considered the company s interaction with the Administrator, and we assessed the control environment in place at the Administrator. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements of each of the company s subfunds as follows: Overall materiality and how we determined it Rationale for benchmark applied 50 basis points (2016: 50 basis points) of Net Assets Value ("NAV") at 30 June 2017 for each of the company s sub-funds. We have applied this benchmark because the main objective of the company is to provide investors with a total return at a sub-fund level, taking account of the capital and income returns. We agreed with the Board that we would report to them misstatements identified during our audit above 5 basis points of each sub-fund s NAV, for NAV per share impacting differences (2016: 5 basis points of each sub-fund s NAV, for NAV per share impacting differences) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which ISAs (Ireland) require us to report to you where: the directors use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company s and sub-funds ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the company s and sub-funds ability to continue as going concerns. 21

22 Independent auditors report to the members of UBS ETFs plc (continued) Report on the audit of the financial statements (continued) Reporting on other information The other information comprises all of the information in the Annual Report and Audited Financial Statements other than the financial statements and our auditors report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. With respect to the Directors Report, we also considered whether the disclosures required by the Companies Act 2014 have been included. Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (Ireland) and the Companies Act 2014 require us to also report certain opinions and matters as described below. Directors Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Directors Report for the year ended 30 June 2017 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. Based on our knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Directors Report. Corporate governance statement In our opinion, based on the work undertaken in the course of the audit of the financial statements, the description of the main features of the internal control and risk management systems in relation to the financial reporting process included in the Corporate Governance Statement, is consistent with the financial statements and has been prepared in accordance with section 1373(2)(c) of the Companies Act Based on our knowledge and understanding of the company and its environment obtained in the course of the audit of the financial statements, we have not identified material misstatements in the description of the main features of the internal control and risk management systems in relation to the financial reporting process included in the Corporate Governance Statement. In our opinion, based on the work undertaken during the course of the audit of the financial statements, the information required by section 1373(2)(a),(b),(e) and (f) is contained in the Corporate Governance Statement. Responsibilities for the financial statements and the audit Responsibilities of the directors for the financial statements As explained more fully in the Directors Responsibility Statement set out on pages 16 and 17 the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company s and sub-funds' ability to continue as going concerns, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so. 22